Industry remains upbeat on AP tech spend
"Asia-Pacific has seen and will see a continual pickup for IT products and services," said Saw Ken Wye, Microsoft's newly appointed president for Southeast Asia. "This is due largely to the opportunities in countries like China and India where growth will be fueled by both internal and external demand."
Saw attributed the market opportunities to IT spending by the government and commercial sectors, as India and China play "catch up" and strive to build the right infocomm technology infrastructures to support their local businesses.
Graeme Philipson, an independent tech industry analyst, echoed Saw's sentiments. "Much of this is driven by China's extraordinary growth, which was not a factor in the 1990s," he said.
Philipson attributed the positive outlook to an increase in market confidence, a point shared by several technology vendors, including Oracle which described its fiscal 2005, ended Mar. 31 this year, as a record year for its Asia-Pacific business.
"Confidence has returned. Asians are naturally confident people, and we are in another boom," Philipson said, adding that Asian companies are in the reinvestment phase of the technology cycle.
"The hardware and systems that were introduced during the tech boom of the late 1990s, abetted by the Y2K issue, are now being replaced and upgraded," he explained.
Saw added that, along with business technology trends like outsourcing, the rising consumer tech dollar is also helping to boost the market. "The consumers in Asia have woken up and are driving a significant demand for PC and mobile devices," he noted.
Richard Smith, vice president for IBM's Asia-Pacific software business, is also bullish about the region. "We see a very favorable outlook for the software marketplace, with industry projections for middleware growing at a healthy pace," he said.
"In the last three months specifically, demand for IBM software was strong among clients of all sizes. China and India continued to be among our fastest-growing markets, and we believe that trend will continue," Smith added.
The good old days
Although the gloomy days of the tech crash may well be over, those hoping to see IT spending return to pre-1997 days may have to wait a little longer.
"I don't see the current climate similar to what it was before 1997," said Saw. "Firstly, it was pre-Y2K. Consumers and businesses then were investing in upgrading their IT infrastructure and systems in view of the threat, and precaution taken with the millennium bug.
"It was also about the same time when there was great hype and excitement around Internet start-ups and the Internet boom, which disappeared just as fast when the Internet bubble burst," he explained.
The business climate today is different, Saw noted. "A lot of those investments just prior to year 2000 are now coming to the end of the product lifecycle, so we anticipate a slight increase in new investments in technology."
He also highlighted the difference in the level of IT adoption and usage. "We are also working off a more sophisticated user base. PC penetration in business and homes has grown significantly," he said. "Broadband is more pervasive in Asia than the rest of the world, and we are the undisputed leaders in the use of mobile technology. The situation was indeed very different eight years ago."
These changes, Saw added, are the reasons behind his confidence that growth in today's market is sustainable.
"While I wouldn't compare it to what it was in 1997, I am optimistic that the IT growth is going to be positive over the next few years because of the penetration of technology, and its usage to consumers and businesses of all sizes," he said. "I anticipate the growth to be more sustaining over the next few years than it was pre-1997."
K. C. Yee, Asia-Pacific vice president for Serena Software, agreed that the focus has changed to one where IT is better aligned with business objectives.
"The focus is on 'back-to-basics' spending, not just to fuel unfettered growth, which was the case pre-1997 and pre-Y2K," said Yee. "Much of this spending is now directed at software and tools to improve productivity, therefore achieving better control of their IT operations."
Currency impact
On whether the recent decisions by China and Malaysia to revalue their currencies will impact this outlook, Saw maintains that it is still too early to say.
"Essentially, with the value of the (Chinese) yuan going up, this means that US dollar-based goods will be cheaper. This also indirectly means that the cost of doing business in China is now higher. If anything at all, the market needs some time to find out what the new norm is," he said.
Other industry observers are optimistic and hopeful for a gain.
Yee said: "Most IT products are international, and China and Malaysia therefore would import these products. With China and Malaysia having stronger currencies, they will have more income to invest and potentially drive more purchases of IT products and services."
Diana Ng, an analyst with research firm AMI-Partners, agreed that IT spending in the Asia-Pacific region may improve with China's latest currency move as "the revaluation of currencies may boost spending power".
However, she warned: "There may not be a tremendous upsurge in IT spending given that Asian governments will take efforts to prevent their own currency from rising too much against the Greenback at too fast a rate."
According to Ng, small and medium-sized businesses (SMBs) may adopt a wait-and-see attitude. "SMBs may make decisions based on market and economic movements after the news about the unpegging of the yuan and (Malaysian) ringgit has stabilized," she noted.